B-145008, JUNE 13, 1961, 40 COMP. GEN. 684

B-145008, JUNE 13, 1961, 40 COMP. GEN. 684

CONTRACTS - MODIFICATION - FIXED PRICE CONTRACTS - INCREASED COSTS - GOVERNMENT AGENTS AUTHORITY REFORMATION OF A FIXED-PRICE SEWAGE DISPOSAL CONTRACT WITH A COUNTY TO INCREASE THE AMOUNT REPRESENTING THE PROPORTIONATE SHARE OF THE FEDERAL GOVERNMENT'S CONTRIBUTION FOR CONSTRUCTION FOR THE REASON THAT, IN THE SEVERAL YEARS WHICH HAVE ELAPSED SINCE NEGOTIATION OF THE CONTRACT AND COMMENCEMENT OF CONSTRUCTION, COSTS HAVE INCREASED SO THAT THERE WILL BE AN UNEQUAL TAX BURDEN ON THE CITIZENS OF THE COUNTY WOULD BE CONTRARY TO THE WELL-ESTABLISHED RULES THAT CONTRACTS CONTAINING AN EXPRESS STIPULATION AS TO AMOUNT ARE CONCLUSIVE UPON THE PARTIES AS TO THE MEASURE OF RECOVERY FOR PERFORMANCE AND, IN THE ABSENCE OF A COMPENSATING BENEFIT TO THE UNITED STATES, AGENTS AND OFFICERS OF THE UNITED STATES ARE WITHOUT AUTHORITY TO MODIFY EXISTING CONTRACTS OR TO SURRENDER OR WAIVE CONTRACT RIGHTS THAT HAVE VESTED IN THE GOVERNMENT.

TO THE ADMINISTRATOR, VETERANS ADMINISTRATION, JUNE 13, 1961:

REFERENCE IS MADE TO LETTER OF FEBRUARY 6, 1961, FROM YOUR DEPUTY ADMINISTRATOR REQUESTING OUR DECISION AS TO WHETHER CONTRACT NO. V1005 M 597 ENTERED INTO UNDER DATE OF MAY 5, 1955, WITH THE COUNTY OF CUYAHOGA, OHIO, INVOLVING THE CONSTRUCTION OF A NEW SEWAGE DISPOSAL PLANT AND THE FURNISHING OF SEWAGE DISPOSAL SERVICE FOR THE NEW VETERANS ADMINISTRATION HOSPITAL IN BRECKSVILLE MAY BE REFORMED OR MODIFIED TO REFLECT CURRENT COSTS. IT WAS EXPLAINED THAT AT THE TIME OF THE SUBMISSION THE COUNTY HAD NOT STARTED CONSTRUCTION AND THAT IN THE LIGHT OF INCREASED COSTS THE COUNTY HAS REQUESTED VETERANS ADMINISTRATION TO PAY A PROPORTIONATE SHARE OF SAME.

IT IS STATED IN THE LETTER OF SUBMISSION THAT THE NEGOTIATIONS LEADING UP TO THE EXECUTION OF THE CONTRACT BEGAN IN 1953; THAT DURING THE NEGOTIATIONS THE COUNTY WAS ADVISED THAT THE MAXIMUM FLOW FROM THE PROPOSED NEW HOSPITAL WOULD BE APPROXIMATELY 240,700 GALLONS PER DAY; AND THAT THE COUNTY THEN ADVISED THAT SINCE IT PLANNED A PLANT OF A CAPACITY OF 500,000 GALLONS PER DAY THE ADMINISTRATION SHOULD PAY THE DIFFERENCE BETWEEN THE COST OF SUCH A PLANT AND A PLANT OF A DAILY CAPACITY OF BETWEEN 750,000 TO 800,000 GALLONS. IT IS STATED FURTHER THAT THE ADMINISTRATION WAS LATER ADVISED BY THE COUNTY THAT A PLANT OF A DAILY CAPACITY OF 800,000 GALLONS WOULD BE CONSTRUCTED AND THAT THE GOVERNMENT SHOULD REIMBURSE THE COUNTY THE DIFFERENCE BETWEEN A 500,000 GALLON AND AN 800,000 GALLON PLANT. IT IS EXPLAINED THAT SINCE THERE IS NO APPRECIABLE DIFFERENCE BETWEEN A 750,000 AND AN 800,000 GALLON CAPACITY PLANT, THE ADMINISTRATION AGREED TO THE COUNTY'S PROPOSAL WITHOUT PROTEST, BUT THAT SINCE THE GOVERNMENT WOULD BE REQUIRED TO PAY THE DIFFERENCE IN COST BETWEEN THE TWO PLANTS IT WAS FELT THAT THE AGREEMENT SHOULD PROVIDE FOR A PERMISSIBLE DAILY FLOW OF NOT LESS THAN 300,000 GALLONS. ON THE BASIS OF A VERBAL RECOMMENDATION BY THE COUNTY SANITARY ENGINEER THE PERMISSIBLE FLOW FROM THE GOVERNMENT'S FACILITY WAS SET AT 330,000 GALLONS PER DAY IN ORDER TO AVOID THE NECESSITY OF RENEGOTIATION IN THE FUTURE.

THE FOREGOING NEGOTIATIONS CULMINATED IN THE EXECUTION OF CONTRACT NO. V1005 M 597 PROVIDING FOR THE FURNISHING OF SEWER SERVICES BY THE COUNTY TO THE HOSPITAL FOR A TERM OF 50 YEARS. THE CONTRACT RECITES THAT THE GOVERNMENT PLANNED TO CONSTRUCT AND OPERATE A GOVERNMENT HOSPITAL OF APPROXIMATELY 1,000 BED CAPACITY WITH ADJUNCTIVE FACILITIES; THAT THE GOVERNMENT DESIRES TO PROCURE A SEWER CONNECTION, OR CONNECTIONS, AND SEWAGE DISPOSAL SERVICE FOR SAME; THAT THE COUNTY MAINTAINS AND OPERATES A SEWAGE COLLECTING SYSTEM OF ADEQUATE SIZE AND CAPACITY TO HANDLE SUCH SEWAGE; THAT THE COUNTY CONTEMPLATES CERTAIN IMPROVEMENTS TO ITS PRESENT SYSTEM, INCLUDING THE CONSTRUCTION OF A SEWAGE TREATMENT PLANT; THAT THE COUNTY IS IN A POSITION TO FURNISH SEWER CONNECTIONS TO ITS SEWAGE SYSTEM AND PROVIDE DISPOSAL SERVICE THROUGH ITS FACILITIES BY CONSTRUCTING SUCH FACILITIES INCLUDING A SEWAGE TREATMENT PLANT OF ADEQUATE SIZE TO HANDLE SEWAGE FROM THE GOVERNMENT RESERVATION; AND THAT THE GOVERNMENT IS WILLING TO COMPENSATE THE COUNTY FOR PROVIDING THE REQUIRED CONNECTIONS AND SERVICES.

ARTICLE I OF THE CONTRACT STIPULATES THAT THE GOVERNMENT SHALL PAY THE COUNTY A SEWER CONNECTION CHARGE OF $58,260 AS PROVIDED IN ARTICLE 5, NAMELY, WITHIN 60 DAYS AFTER WRITTEN NOTICE SHALL HAVE BEEN RECEIVED BY THE GOVERNMENT FROM THE COUNTY TO THE EFFECT THAT THE COUNTY HAS COMPLETED THE EXTENSION OF THE SEWER FROM THE PRESENTLY EXISTING SEWER LINE IN BRECKSVILLE ROAD TO THE GOVERNMENT PROPERTY LINE AND HAS CONNECTED SAME TO SAID SEWER LINE IN THE ROAD. ADDITIONAL CONNECTIONS MAY BE REQUIRED BY THE GOVERNMENT IN THE FUTURE, TO BE PAID FOR AT COST, AND PROVISION IS MADE FOR PAYMENT BY THE GOVERNMENT TO THE COUNTY OF AN EQUITABLE SHARE OF THE OPERATING COSTS OF THE TREATMENT PLANT TO BE CONSTRUCTED.

ARTICLE 4 PROVIDES THAT THE COUNTY WILL BE SOLELY RESPONSIBLE FOR COMPLIANCE WITH ALL APPLICABLE SANITARY OR HEALTH LAWS, AND CONTAINS THE FOLLOWING SPECIFIC PROVISIONS WITH RESPECT TO THE SEWAGE TREATMENT PLANT:

IN THIS CONNECTION COUNTY IS PREPARING PLANS AND SPECIFICATIONS FOR A SEWAGE TREATMENT PLANT TO SERVE THE GENERAL AREA IN WHICH SAID GOVERNMENT FACILITIES ARE TO BE SITUATED, SUCH PLANT TO BE BUILT PURSUANT TO THE PROGRAM AND ORDERS OF THE OHIO STATE BOARD OF HEALTH. COUNTY'S ENGINEERS HAVE ESTIMATED THAT THE COST OF SUCH PLANT SUFFICIENT FOR THE AREA IN THE ABSENCE OF THE GOVERNMENT'S FACILITIES WOULD APPROXIMATE THREE HUNDRED FORTY NINE THOUSAND, THREE HUNDRED AND EIGHT DOLLARS ($349,308.00); AND THAT IN ORDER TO ADEQUATELY SERVE THE AREA INCLUDING THE ANTICIPATED ADDITIONAL SEWAGE FROM THE GOVERNMENT PREMISES, IT WILL BE NECESSARY TO BUILD A SUBSTANTIALLY LARGER DISPOSAL PLANT WHICH WILL ENTAIL AN ADDITIONAL COST OF APPROXIMATELY ONE HUNDRED SEVENTY THREE THOUSAND, TWO HUNDRED FORTY TWO DOLLARS ($173,242.00). ACCORDINGLY, INCIDENT TO AND AS A CONDITION OF THE DISPOSAL OF SAID SEWAGE FROM SAID GOVERNMENT PREMISES THROUGH SAID PROPOSED NEW SEWAGE TREATMENT PLANT, WHICH METHOD OF DISPOSAL WILL BE MANDATORY UPON THE COMPLETION AND PLACING IN OPERATING OF SAID PLANT, (BUT NOT BEFORE), THE GOVERNMENT SHALL PAY THE COUNTY THE SINGLE ADDITIONAL SUM OF ONE HUNDRED SEVENTY THREE THOUSAND, TWO HUNDRED FORTY TWO DOLLARS, ($173,242.00), IN ADDITION TO THE SUM OF FIFTY EIGHT THOUSAND, TWO HUNDRED SIXTY DOLLARS ($58,260.00), MENTIONED IN ARTICLE 1 HEREOF. PROVIDED, HOWEVER, THAT WHEN THE NEEDS OF THE GOVERNMENT'S FACILITIES EXCEED ON THE AVERAGE MORE THAN THREE HUNDRED THIRTY THOUSAND (330,000) GALLONS PER DAY THEN THE PAYMENT HEREIN PROVIDED FOR SHALL BE EQUITABLY ADJUSTED TO COMPENSATE THE COUNTY FOR ANY REASONABLE ADDITIONAL EXPENSES ARISING THEREFROM.

BY LETTER DATED MAY 4, 1961, THE CLERK OF THE BOARD OF COUNTY COMMISSIONERS OF CUYAHOGA COUNTY FORWARDED HERE FOR CONSIDERATION A MEMORANDUM BY THE BOARD WHEREIN IT IS EXPLAINED THAT CUYAHOGA COUNTY SEWER DISTRICT NO. 13 IS COMPOSED OF PARTS OF TWO MUNICIPALITIES, NAMELY, THE CITY OF BROADVIEW HEIGHTS AND THE CITY OF BRECKSVILLE BOTH OF WHICH HAVE RECENTLY ACQUIRED CITY STATUS, AND THE SEWAGE TREATMENT PLANT IS IN THE CITY OF BRECKSVILLE WHERE THE CAST MAJORITY OF THE USERS ARE LOCATED. IS EMPHASIZED THAT THE CONSTRUCTION OF A NEW PLANT IS BEING FINANCED FROM TWO SOURCES CONSISTING OF A DIRECT CONTRIBUTION BY THE FEDERAL GOVERNMENT AND A DIRECT SPECIAL ASSESSMENT ON THE OTHER POTENTIAL USERS OF THE NEW FACILITIES WHO IN THE FINAL ANALYSIS BEAR THE TOTAL COST SINCE THEY ARE TAXED DIRECTLY BY THE COUNTY AND INDIRECTLY BY THE FEDERAL GOVERNMENT. IS STATED THAT IT IS OF PRIME IMPORTANCE TO CONSIDER THAT BUT FOR THE CONSTRUCTION OF THE HOSPITAL FACILITIES BY THE GOVERNMENT THERE WOULD BE LESS NECESSITY FOR CONSTRUCTION OF SUCH A LARGE PLANT; THAT IT IS SIGNIFICANT THAT THERE IS NO TAX CONTRIBUTION BY THE GOVERNMENT TO THE COUNTY OR THE TWO COMMUNITIES WHEREIN THE FEDERAL HOSPITALS ARE LOCATED; AND THAT THEREFORE, IN ADDITION TO THE REQUIREMENT ON THE COUNTY AND THE TWO COMMUNITIES FOR FURNISHING CERTAIN SERVICES TO THESE INSTALLATIONS, A TREMENDOUS AMOUNT OF OTHERWISE TAXABLE LAND AND THE USE THEREOF HAS BEEN TAKEN FROM THESE COMMUNITIES THEREBY REDUCING THE REVENUE PRODUCING PROPERTY.

IT IS URGED, IN EFFECT, THAT BECAUSE CONSTRUCTION COSTS IN GENERAL HAVE INCREASED MATERIALLY SINCE 1955, THE GOVERNMENT SHOULD CONTRIBUTE ITS FAIR SHARE OF THE INCREASED COSTS SO THAT THE BURDEN OF PAYING SAME WILL NOT FALL SOLELY UPON THE INDIVIDUAL CITIZEN. IT IS URGED FURTHER THAT SINCE THE GOVERNMENT'S FACILITY IS NOT FOR THE SOLE BENEFIT OF THE COUNTY OR THE TWO COMMUNITIES DIRECTLY CONCERNED BUT ON THE CONTRARY FOR THE BENEFIT OF THE ENTIRE COUNTY, SOME OF THE INCREASED CONSTRUCTION COSTS SHOULD BE BORNE BY THE UNITED STATES. FINALLY, IT IS URGED THAT SINCE THIS IS A CONTRACT BETWEEN THE GOVERNMENT AND ITS CITIZENS, THROUGH THE MEDIUM OF ANOTHER GOVERNMENTAL AGENT, THE COUNTY, THE CONTRACT SHOULD BE MORE CAPABLE OF BEING RENEGOTIATED IN ORDER TO PROTECT THE RIGHTS OF THE PRIVATE CITIZEN AND THAT FAILURE TO AUTHORIZE RENEGOTIATION NOT ONLY WOULD BE IN DEROGATION OF THE RIGHTS OF THE INDIVIDUAL CITIZEN BUT IT WOULD ALSO RESULT IN UNEQUAL, ARBITRARY AND NONREPRESENTATIVE TAXATION PLACED UPON A MINORITY FOR THE SOLE BENEFIT OF CITIZENS OF A CERTAIN CLASS.

IT IS REPORTED INFORMALLY THAT THE CONNECTION CHARGE OF $58,260 HAS BEEN PAID TO THE COUNTY AND THAT THE NEW PLANT IS NOW UNDER CONSTRUCTION. THERE IS NO SHOWING, HOWEVER, AS TO CAUSE FOR THE LONG DELAY IN BEGINNING CONSTRUCTION OF THE NEW PLANT OR ANY ALLEGATION THAT THE GOVERNMENT WAS IN ANY WAY RESPONSIBLE THEREFOR.

INFORMAL INFORMATION RECEIVED HERE IS TO THE EFFECT THAT THE COUNTY SANITARY ENGINEER HAS REPORTED THE PRESENT ESTIMATED COST OF THE PLANT AS $577,777.95 AND PRESUMABLY THE COUNTY'S REQUEST FOR REFORMATION IS SUPPORTED, AT LEAST IN PART, ON THAT BASIS. THE PRESENT ESTIMATED COST IS ITEMIZED, AS FOLLOWS:

CHART CONTRACT AWARD ------------------------------------------- $547,777.95 ESTIMATED ADDITIONAL COST DUE TO FOUNDATION

PROBLEM ------------------------------------------------ 30,000.00

TOTAL ESTIMATED COST ----------------------------- 577,777.95

THIS COST, WE ARE INFORMED, IS BASED UPON A PLANT CAPACITY OF 1,000,000 GALLONS PER DAY, WHEREAS THE NEGOTIATIONS LEADING UP TO THE EXECUTION OF THE CONTRACT WERE ON THE BASIS OF PLANT CAPACITY OF 800,000 GALLONS, OF WHICH AMOUNT NOT TO EXCEED 330,000 GALLONS PER DAY WERE ALLOCATED TO THE GOVERNMENT. IT THUS APPEARS THAT THE COUNTY'S PROPOSAL WOULD IN EFFECT IMPOSE UPON THE GOVERNMENT A SHARE OF THE INCREASED COST OCCASIONED BY THE INCREASED CAPACITY, NO PART OF WHICH IS FOR THE BENEFIT OF THE GOVERNMENT.

WHILE THE NEGOTIATIONS LEADING UP TO THE CONTRACT WERE BASED UPON ESTIMATES OF COST, THE AGREEMENT AS TO THE GOVERNMENT'S CONTRIBUTION UNDER THE CONTRACT WAS STATED IN DEFINITE AND FIXED AMOUNTS, NAMELY, $173,242 FOR CONSTRUCTION AND $58,260 AS A CONNECTION CHARGE. SUCH CHARGES ARE FIRM, FIXED CHARGES WITHOUT ANY CONDITION, RESERVATION OR ANY PROVISION FOR ADJUSTMENT IN THE EVENT THE CONSTRUCTION COST OF THE NEW PLANT SHOULD VARY EITHER UPWARD OR DOWNWARD FROM THE ESTIMATES OF THE COUNTY ENGINEERS. THE ESTABLISHED RULE IS THAT WHERE A CONTRACT CONTAINS AN EXPRESS STIPULATION AS TO THE AMOUNT TO BE PAID, SUCH STIPULATION IS CONCLUSIVE ON THE PARTIES AND MEASURES THE AMOUNT OF RECOVERY FOR PERFORMANCE. SEE BRAWLEY V. UNITED STATES, 96 U.S. 168, AND SIMPSON V. UNITED STATES, 172 U.S. 372. ALSO, THE GENERALLY ACCEPTED RULE IS THAT "WHERE ONE AGREES TO DO FOR A FIXED SUM A THING POSSIBLE TO BE PERFORMED, HE WILL NOT BE EXCUSED OR BECOME ENTITLED TO ADDITIONAL COMPENSATION, BECAUSE UNFORESEEN DIFFICULTIES ARE ENCOUNTERED.' UNITED STATES V. SPEARIN, 248 U.S. 132, 136; KANSAS TURNPIKE AUTHORITY V. ABRAMSON, 276 F.2D 711. SEE ALSO DAY V. UNITED STATES, 245 U.S. 159; BARNARD-CURTIS CO. V. UNITED STATES, 244 F.2D 565; RESTATEMENT, CONTRACTS, SEC. 467 (1932); WILLISTON, CONTRACTS, REV. USED. SEC. 1963.

THE CONTRACT VESTED IN THE UNITED STATES RIGHTS TO SEWAGE TREATMENT AND DISPOSAL UPON THE EXPRESS TERMS THEREIN PROVIDED. IT IS A WELL ESTABLISHED RULE THAT WITHOUT A COMPENSATING BENEFIT TO THE UNITED STATES, AGENTS AND OFFICERS OF THE UNITED STATES HAVE NO AUTHORITY TO DISPOSE OF THE MONEY OR PROPERTY OF THE UNITED STATES, TO MODIFY EXISTING CONTRACTS, OR TO SURRENDER OR WAIVE CONTRACT RIGHTS THAT HAVE VESTED IN THE GOVERNMENT. SIMPSON V. UNITED STATES, 172 U.S. 372; UNITED STATES V. AMERICAN SALES CORPS., 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 74; PACIFIC HARDWARE CO. V. UNITED STATES, 49 CT.1CL. 327; BAUSCH AND LOMB OPTICAL CO. V. UNITED STATES, 78 CT.1CL. 584.

THE BRIEF SUBMITTED BY THE BOARD OF COUNTY COMMISSIONERS IN SUPPORT OF THE REQUEST FOR MODIFICATION OF THE CONTRACT IS BASED UPON MORAL AND EQUITABLE CONSIDERATIONS. OUR OFFICE, HOWEVER, IS WITHOUT AUTHORITY TO DETERMINE CLAIMS BY OR AGAINST THE UNITED STATES SOLELY ON THE BASIS OF EQUITABLE OR MORAL CONSIDERATIONS. ITS JURISDICTION IS RESTRICTED TO THE CONSIDERATION AND DETERMINATION OF SUCH MATTERS IN ACCORDANCE WITH THE APPLICABLE LAW OR UNDER THE TERMS OF A VALID AGREEMENT EXECUTED PURSUANT TO LAW.

ACCORDINGLY, YOU ARE ADVISED THAT WE FIND NO LEGAL BASIS FOR AUTHORIZING REFORMATION OR MODIFICATION OF CONTRACT NO. V1005 M 597.